Q2 2021 Turning Point Brands Inc Earnings Call
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Good morning, and welcome to the kidney.
Point brands second quarter, 2021, 8 Inc Conference call.
All participants in listen only mode.
All lines have been placed on mute to prevent any background noise should you need assistance. Please signal a conference factually bypassing the psyche followed by you.
Yeah.
So today's presentation, there will be opportunity to ask question.
Please note this event is being recorded.
I would now like to turn it upon France over to your Speaker really hear from you know Chief Financial Officer. Please go ahead.
Good morning, everyone.
Our Chief Financial Officer.
Joining me are turning point brands, President and CEO, Larry Wexler, Graham Purdy, Chief operating officer.
This morning, we issued a news release covering our first quarter results.
This release is located in the IR section of our website Www, turning point brands Dot Com, where a replay of today's conference call will also be available in this call.
After this concert consolidated.
To provide a perspective on our progress against our strategic plan.
Jim.
And as customer Inc. I direct your attention to the discussion of forward looking and cautionary statements in today's press release and the risk factors in our filings with Securities and Exchange Commission.
The disclosure outlines various factors that could cause.
We want our results to differ materially from projections or forward looking statements that may be cited in today's discussion. These forward looking statements and projections are not guarantees of future performance you should not place undue reliance upon them, except as provided by federal Securities laws. We undertake no obligation to publicly update or revise any forward looking statements index.
In the call.
We will reference certain non-GAAP financial measures these measures and reconciliations to GAAP can be found in today's earnings release, along with reasons why management believes they provide useful information.
I will now turn the call over to Larry Wexler, our CEO.
Thank you Louis and good morning, everyone. Thank you for joining the call.
We are pleased to reported quarter and once again outperformed our expectations.
In the second quarter revenue was up 17% to $123 million above our prior guidance range and adjusted EBITDA was up 32% to $30 million.
Revenue growth was led by <unk>.
Today, with which had an exceptional quarter with over 70% growth.
We are harvesting the fruits of our strategic growth initiatives and are continuing to outperform the market.
We were also aided by a favorable comparison against Covid disruptions in our EFS business that negatively impacted the prior year period and the consolidation.
Exasperation marketing results.
There was progress throughout our product lines paper cones and E. Commerce continued to provide a big boost to sales, while our <unk> business benefited from sales force execution against favorable market demand and benefit from the trading inventory load.
In total rep sales doubled in the quarter.
Stokers performed in line with our expectations and was up 8% led by double digit growth at MSG, which continues to be well positioned for the secular shift into the value category.
Our chewing tobacco business gained share but had a modest sales decline.
As a comp against a competitor going off line in last year's quarter.
Do Gen faced a tough year over year comp and into new regulatory hurdle outperformed our expectations during the quarter.
Distribution team.
<unk> well to the implementation of the path Act, which made the logistics of delivering value.
<unk> products to customers and consumers were challenging.
While we still expect volatility in new channel, we're seeing progress in both the fda's efforts around the PMA process and increased enforcement against unauthorized products still in the market.
During the second quarter, the FDA issued 52 warning letters.
Any factors that did not submit a P MTA, bringing the total to the end of the quarter to 131 warning letters sent out since January.
In effort to bolster its enforcement against the legal products in the market.
Importantly on May 20th the FDA posted its continued compliance list.
Which provides a directory of those deemed do tobacco products for which PMT was timely submitted.
We believe this list will provide retailers and trade customers.
More clarity on which products they can carry.
This includes our submissions for our gaming products all of which have now received acceptance.
<unk> letters a number of the products are now on scientific review.
We are confident that we have submitted robust filings and anticipate working successfully with the FDA through the process.
We believe that both the <unk> and the pmk process are creating barriers to entry in our business that will position us well in.
In the long term as these factors force a consolidation in the industry.
We've also been very active in our capital deployment.
With share repurchases and investments.
In April our subsidiary Recreation marketing acquired D. VW, a distributor with strong presence in British.
And with major national chains.
The VW as marginal profitability at the onset it serves as a great platform to expand distribution of our more profitable proprietary products in area, where we previously had limited reach.
Last week, we announced a $8 million investing.
<unk> 1 of the most recognized brands in the cannabis space with product offerings in 7 states.
<unk> has a nimble asset light non planned country business model has allowed us to scale across multiple states and a team that has been adept at managing the ever changing complexities of the.
Canada's market.
<unk> fits well within our strategy of building a house, a scalable well known brands in the cannabis industry join.
Joining previous investments in dark light, which holds the rights to the morally brands for cannabinoids in doses.
What caught our attention with old Pal is their experienced management team and the awareness they.
<unk> and other build with the brands, even if states in which they do not currently operating.
Our investment will allow them to accelerate their growth.
Also providing a prime opportunity to increase our own product sales presence in dispensaries.
Yesterday, we also announced the acquisition of certain cigar assets of unit demand.
<unk> been able to grow into a very important multibillion dollar category, where industry observers have highlighted that growth is being driven by candidates consumption.
<unk> is a perfect complement complementary product to our MRO cigar business, but 1 where we were lacking the necessary IP to compete effectively in this space.
Back to back assets come with a portfolio of grandfathered products and other FDA pre market filings, providing us with broader and more cost effective platform to compete in the market.
Our plan is to expand distribution per unit to <unk> brands, while leveraging the IP to introduce line extensions in the Zig Zag cigar portfolio.
Unit.
With approximately $180 million of liquidity on our balance sheet and in the second quarter, along with strong free cash flow generation. We remained very active on the acquisition and investing from.
With another solid quarter of performance, we are able to raise our guidance once again and look.
Folio to continuing our momentum.
Add some additional color and perspective on our quarter and the path forward, Let me turn the call over to Graham Purdy Chief operating officer.
Thank you Larry.
Let me now give you a quick snapshot of the performance from the segment level.
The exact products saw double digit growth from the quarter led.
Look forward to pulling of sales in both our <unk> cigar wraps and Canadian businesses and strong double digit growth in U S. Rolling papers led by E Commerce and paper cones.
Our <unk> cigar wrap business compared favorably against the previous year period that experienced a COVID-19 related disruption.
When our third party manufacturer went off line.
By a retail sales accelerating we were able to leverage a more efficient supply chain post the <unk> acquisition to.
To fill the backlog that was built up heading into the current quarter and further benefited from an inventory trade loading as our customers built buffer inventory, which pulled roughly $2 million of sales into the quarter.
In the U S.
The exact papers position as the leading premium and overall paper brands strengthen increasing its share in the measured market by 2.4 percentage points.
Points year over year to 35, 1% according to MSCI.
After not growing share for the first 3 years since our IPO. This was the eighth consecutive quarter <unk> realized year over years.
Year share growth, reflecting the portfolio and channel efforts put in place to revitalize the business, where we are still in the early stages of this process.
Our new products and our expanding e-commerce platform again provided a boost.
During the quarter, our paper cones had 33.3 percentage share of this segment in the measured.
As your channel According to MSCI up 10, 5 points from the previous year as our volumes more than doubled.
We continue to lead the growth and penetration of the product and convenient stores.
And are expanding our presence in the non measured alternative channel or <unk> is still under represented.
In Canada.
Strong quarter of growth with our business more than doubling as recreation marketing, which is now being consolidated.
To ramp and is now being bolstered by D. B W.
E Commerce was again, a big driver of growth.
Our ecommerce business, which is now double digits of our U S paper sales.
It's still only a year.
We had a hole in.
<unk> continues to make strides.
Up over 3.5 times last year's levels and up 50% from the previous quarter.
Stokers products to high single digit growth in the quarter with double digit growth from moist snuff again being the driver.
Stokers market share was up to 5.8%.
And I have a little over 50 basis points compared to a year ago. According to MSCI.
Stokers moist snuff is now in stores, representing 62.2 per cent of industry volumes.
3.8 points above last year's level, which still leaves a long runway for further growth.
Turning it back with sales saw low single digit.
<unk> declined during the quarter after comping against a quarter that saw 6% growth when a competitor experienced COVID-19 related disruptions in the prior year period.
Despite the tough comp stokers Chew gained 20 basis points with a 26% share from the second quarter. According to MSCI to position Stokers is the number.
Chewing tobacco brands.
With the continued secular shift into the value category and stokers positioning as a leading value brands.
Tobacco business is well placed to provide us with a stable annuity stream of cash flow going forward.
Moving to new channel, where we once again had a resilient quarter and a.
Number 1 relative environment.
Our base distribution business saw double digit declines against the tough comp during the prior year. When we benefited from a COVID-19 related disruption at a competitor and a strong need to see orders during the state on provisions.
The business did benefit from advanced buying in April ahead of the stricter shifting regulations.
<unk> around vaping as a result of the implementation of the path Act.
We believe this boosted sales by $2 million during the quarter as customers adjusted to the longer lead times by building inventory.
The <unk> had a meaningful impact on costs, our outbound freight expense base business, which was recognized in SGA was.
It's up over 300 basis points as a percentage of its sales from the previous quarter.
And this increase was only partially passed onto the customer.
We believe that the additional costs and complexities around the logistics of delivering big products to customers caused by the tack that is consolidated industry further positions.
Position positions us well.
Take share.
Outside day 1.
<unk> contributed to our growth and we are encouraged by the early reception of our free White nicotine pouch as we began its rollout during the second quarter.
Going forward, while we continue to expect short term volatility that make the distribution business, we like our positioning.
Long term competitive standpoint, and are excited by some of our new product launches, including free at new ex.
And with that I'll turn it to Louis for a review of our fourth quarter financial performance.
Thank you grant our performance in the second quarter was ahead of plan once again.
Turning to the segment reviews.
The exact products net sales in the quarter decreased 72, 3% to $47.2 million with a double unit and our NYSE <unk> and Canadian businesses and strong double digit growth in the U S roaming theaters total.
Zig Zag segment volume increased 64, 6%, while price mix increased 7.7%.
According to MSCI first quarter industry volumes per U S. Rolling papers increased mid single digits and the.
Mark Metro channel.
During the quarter our volumes grew at 2.8 times the rate the overall market and Zig zag contributed over 90% of the industry's growth, but our paper cones being the major driver.
Excluding the incremental volume growth, we are seeing from the alternative and ecommerce channels.
And wireless cigar wrap industry volumes were up strong double digits in the quarter.
During the quarter, we saw the segment's gross margins expand by 160 basis points to 58, 8%. This was the result of the financial benefit of eliminating royalty.
This growth effort, resulting in higher margins for <unk> cigar wrap product.
Zig Zag accounted for 58% of our segment operating income in the second quarter and continues to be our fastest growing segment.
Focus products net sales increased 8.3% to $33.4 million in the quarter net sales for the MST portfolio grew 16.1.
And represented 62.
<unk> revenues in the quarter up from 58% a year earlier.
Total <unk> volume increased 2.4% with price mix advancing 5.9%.
Second gross margins expanded by 80 basis points to 54, 4% during the quarter driven by price across the segment and fixed cost leverage.
1% net EBIT.
Year over year industry volumes for MST were flattish with chewing tobacco declined by approximately 3%.
It's focused branded shipments to retail continues to outpace the industry in the quarter growing its MSCI share in both chewing tobacco and MSC.
Moving to our new Gen segment net sales decreased 10.
10.0 percentage of $42.1 million driven by tough comps in the base distribution business was up 13% sequentially, which was above our expectations.
We continue to expect near term volatility due to the PMA process in 2021, along with the impact of the pack that.
For the quarter Neogen gross profit contracted 20 basis.
At this point to 33, 5%.
Now moving to the consolidated business.
Adjusted EBITDA for the quarter was a 32% to 30.0 million, we achieved 41% incremental margins during the quarter, reflecting the strong performance in our core segments as we leverage our fixed cost structure.
In this morning's release, we updated our 2.
2021 guidance as follows.
Net sales of 447% to $104.62 million. This is up from previous guidance of 422, and $440 million and includes a $109 million to $114 million in the third quarter.
Adjusted EBITDA for the full year is now expected to be 108 to 100.
$8 million up from previous guidance of $103 million to $108 million.
For <unk>, we expect strong double digit sales growth as I mentioned <unk> benefited from roughly $2 million of orders from a trade inventory load that pulled forward sales from the third quarter.
As a reminder, in 2020, our cigar business.
Third submitted from $5 million in backlog build in the fourth quarter as we recovered from manufacturing related disruptions early new year.
Your year over year comps during that fourth quarter.
Going forward, we expect the exact gross margins to moderate slightly from second quarter levels due to mix this recreation marketing ramps up and.
The net contribution of lower gross margins from the VW acquisition.
For <unk>, we expect high single digit sales growth in chewing tobacco, we face another tough comp in the third quarter. When we grew 10% year over year last year as the competitor was temporarily out of the market.
For <unk>, we now expect flat growth up from previously.
As items of mid to low single digit decline in revenue.
This includes low single digit declines for base distribution. This is up from previous guidance of single digit decline offset by growth in new ex.
We believe <unk> sales in the quarter benefited by $2 million as customers increased inventory levels as they adjusted to the longer delivery times.
Due to the logistic logistical challenges of Deepak Dutt.
Moving to our balance sheet, we ended the quarter with $157 million of cash on the balance sheet and $179 million of available liquidity.
This puts us in a strong position to execute on an active pipeline of opportunities. We're currently evaluating to grow our business.
With that.
I'll turn the call back to Larry for closing comments.
We had a strong first half to the year.
Core businesses continued to perform led by Zigzags performance, we're benefiting from solid execution and a favorable environment driven by the secular growth in cannabis consumption.
Stoecker.
<unk> continues to drive share gains and new Gen has performed well amidst the disruption of PMT process and the pack, there which are likely to be transformational event for the industry.
Our strong performance would not be possible without the continued efforts of our employees and want to personally thank them once again for their commitment.
Contribution to our success.
Thank you for participating in the call today and with that I'd like to open the call to questions.
Ladies and gentlemen are in line.
Like to ask a question you will need to press star 1 on net telephone. So we drew a question best of bounty. Please standby will compile the gangway.
Walter again, if it would like to ask question. Please press star 1.
We have our first question from Eric des <unk> from Craig Hallum Capital, Sir Your line is open.
Alright, great. Thanks for taking my question and congrats on a really impressive quarter here.
Here.
So first from me.
And new Gen.
Nice job weathering the volatility from book PMT a impact here.
Understanding the dust has not fully settled yet.
But could you give us an update on the competitive landscape, there and your ability to ultimate.
The increased mix of proprietary products.
We've been talking about there is a lot of volatility.
We've seen a number of smaller competitors go out of business.
We've also seen some of the.
1 of the larger competitors.
Grow a bit.
Looking forward.
We expect to see accelerated activity by the FDA as it gets close to their previously announced date for completing the MTA process, which since September I don't think they're going to hit that given every indication they are not going to complete.
The process by then but I think that theyre going to want to put some.
News out in terms of where they are low.
Long that long that.
Process.
So we so we continue to see.
Volatility.
The U S. P. S is currently still shipping.
So the b to B product, so we haven't seen the complete.
Implementation of the path Act that will be another disruptive event in the ER.
Going forward.
Okay great.
Like you guys are.
Ah well positioned to handle all of that is a good thing.
Net 1 from me on the on the M&A front you guys have really made some nice investments in.
Doses Doc line now old Pal clearly building up an impressive brand portfolio.
Kind of.
Attaching yourself to that high growth Canada segment.
With old tell you guys called out the fact that they are non plant.
Yes.
Would you guys look to consolidate any of these non plant touching cannabis brands.
In the near future here or.
Or should we think of.
Really all of these as sort of remaining minority investments until we get some sort of February.
Yeah. So they are they are minority investments at the moment and as you mentioned.
I think our objective is that vs.
These are standalone companies right now when we have the option to deploy more capital.
So I think that the strategy here is to build a house of brands diversify our portfolio and be able to kind of double down as these business if the risk as we get closer to federal legalization to bring.
Touch out how we do that well.
It will be kind of determined feature.
Ups.
Okay that makes sense.
And then last 1 from me here just within the Zig Zag business.
Im not sure if I missed it but could you guys quantify the bus.
Your ability the inventory pull through in the quarter.
And then maybe.
Bring them on as an update on the.
The competitive landscape in net non measured channel and your efforts to increase share there. Thanks.
Yeah, So Eric strength.
Yes, we estimate about $2 million that was that was pulled into the quarter.
Yes.
So what happened was going into what we we filled our backlog.
And post the quarter, our trade customers wanted to buildup inventory buffer given what happened with COVID-19 over the last year and so we believe that pulled $2 million of that inventory into the quarter.
That makes sense.
And then just an.
Update in that non measured channel in the competitive landscape and your ability to penetrate there just any any kind of color there would be helpful. Thanks.
We continue to make we continue to make progress we actually.
Tested.
Putting us signing some people to that to that area. We liked the results of that test. We are now in the process of hiring more people to address the.
The non measured channels, if you will.
Youre starting to see some penetration by zigzag additional penetration by 6 dispensaries.
As well as a net shops.
And the other.
Non traditional areas.
We've long runway you still have lots of upside there, we're not totally satisfied with where we are but.
We're making progress.
The whole power investments outside of the investment itself being attractive.
Strategic complement to our strategy there.
As you know Pal.
He makes a flower as a percentage of sales, which which goes along well with our.
Smoking accessories that go into the dispensaries.
That makes sense critical congrats again guys.
Yeah.
Your next question comes from the line of Borgata, Ken from Brad.
Please share your line is open.
Hi, good morning.
Thanks, a lot from taking my question.
So 3 questions 1 is on this acquisition.
Turning to Bob can you help us just.
Your line is like how it does.
Opportunity Pan out over the next few years and that has been growing quite fast over the last 12 months, but I guess up to 6 months ago the spread.
Greg Barnes.
So could this kind of growth rate that we're seeing at the drag right now like 30, 40% can it sustain now.
For the next field assets.
Scale of the tobacco business.
Yes, I don't think were going to underwrite 40% growth forever.
So.
What I will say.
The markets are we competing now with rolling papers and wraps is less than 500 million.
From a wholesale.
Now revenue standpoint.
The cigar market, which is a perfect complement to our <unk> wireless RF product.
A $2.5 billion, plus market and growing pretty nicely.
And so this provides us a great platform to be able to answer that.
We enter that market more efficiently and more cost effectively and so thats, a big market opportunity for us to be able to get back into with this acquisition.
Okay.
And then secondly on all of these acquisitions that we have done while net sales.
Non-GAAP now almost.
I would say yes.
So what are the other learning needs and have those operations net deposits, but you have to step out and when you net those initial investments.
Yes.
Well.
Our expectations for a gradual ramp I think that is taking place now it is.
Relatively new category and smokable hemp CBD that is 1 that we feel has growth potential as some nicotine cigarette smokers.
1 alternative form of smoking experience without the nicotine.
<unk>.
<unk> it.
It's been as we.
If I could.
And doses.
We are we're kind of pleased with some of the transformation is doing in terms of.
Expanding the brand into other categories like like Gummies and other form factors.
As well as entering the CBD line, but it's early in the progress Bill in terms of kind of the introduction of these line.
Lastly, 1 housekeeping item what.
What are the main effect from the consolidation of the creation marketing, which I think has often into the dragline from suggest separated out from us than we've ever reported in the benefit of this acquisition that can condition that would be with the new acquisition in this core book.
Yes, it's about $2.5 million for the quarter.
BBW had about a little over a month of benefit into that into that quarter.
Okay.
Yes, 2 months 2 months of benefit.
During the quarter.
Sure. Thanks, a lot.
Your next question comes from the line of Susan Anderson from B Riley.
All right.
Ma'am your line is open.
Yes, Alec leg on vs.
Just a question on Zig zag sales to the E Com channel.
You ever disclose what percentage of sales are.
E Comm and then just longer term what percent of penetration where do you aim to reach and then what's the margin delta between selling through your E Comm channel versus your partners.
Sure. It's about right now as a percentage of our U S paper sales in the teens.
As a percentage.
Of our U S paper sales so.
Our goal is to continue to ramp that.
1 part of the business.
We think has more significant opportunity to ramp as our <unk> business.
So that is kind of dovetails with alternative strategies to getting more of our product into Spence recently.
Recent head shop.
So part of the strategy last year in terms of attacking that was using this platform.
And go to trade shows to sign up more consumers and customers onto it and obviously that did not happen.
Except that we thought last year, given that there weren't any trade shows.
That's still a big piece of the strategy.
We are still kind of rolling out. So we continue to expect that the e-commerce business to continue to ramp for us.
And then I guess, just the margin difference between selling through that channel.
Comparable at the moment it seems it could fluctuate depending on the product mix.
Okay.
And then I guess another follow up on interest.
Utilizing that brand awareness.
You've mentioned previously on expanding into apparel and accessories at the alternative channel I guess how is that.
And then what do you think the longer term opportunity for that would be.
It's going well.
It's still a small piece of the business, but growing nicely.
This also dovetails dovetails well into our head shops and alternative strategy in E. Commerce. Because these are products. When we focus just a convenience store. So it wasn't really a home for them. The convenience stores just because of the limited shelf space that you have but they are a perfect product to get into head shops at that.
And embracing more of a lifestyle around the brands and so we're seeing some success around that as long as well as selling through our ecommerce channel. So it's still early as well on mix centuries, but we're seeing nice growth on it.
Perfect. Thank you so much.
Again.
As a reminder, if your line is to ask a question. Please press star 1 from the telephone. Your next question comes from the line of Greg Sandy from Sidoti and company. Please go ahead.
Hey, guys. Thanks for taking my question just shifting gears to stokers can you just kind of walk us through in light of the 8% growth there.
Why did you take pricing typically in the May June period, and I think earlier, you mentioned the trade down where we are.
Where do you think we are in terms of consumers trading down is it more intense than normal or is it just kind of.
Now on par with what you saw last year.
So the trade down.
As a secular trend or many years, we did see.
Some acceleration last year during the lockdown period.
Covid.
Moving and I think it's returning more towards traditional long term secular rates.
Okay, Great and then just in pricing did you take some pricing.
And then can like EBIT in the prior year, yes.
Okay.
Also just moving on in terms of the buyback you bought back a little bit more stock than you typically have it looks like just how are you thinking about the buyback in terms.
Are there any metrics that we should be thinking about.
That's.
Accelerating accelerated the buyback during the period.
It's meant our buyback is meant to be opportunistic in.
In situations, where it is.
A lot of non non fundamental.
Kind of drivers to our stock.
We think those opportunities to be more aggressive on the buyback.
And then just 1 final 1 just in the premium innovation that Youre seeing I guess, Inc. From papers to Collins, where do you think we are in terms of that.
Like what percentage and then how much legs.
I have to add or is it just kind of trauma.
Net.
And several years ago, you think.
So we think we are driving.
2 separate channel, but theres the measured channel in the non measured channel.
So let's take the measured channel for US and you mentioned, we are driving the growth and penetration.
Of kind of <unk> in there so.
It's still relatively new in this in the C store channel.
Our.
Within the industry.
Stores that ordered.
Papers, only 30% ordered paper cones, so there's still a decent opportunity there in terms of penetration within our paper.
Papers business.
In the measured channel in the teens percentage of our volume.
Yes were still kind of early net pension in the measured channel in the non measured channel, we believe Cohen with bigger percentage of the market and we are also much more heavily underrepresented there.
We see bigger upside.
In the non measured channel in terms of kind of opportunity set there.
Okay, Great. That's very helpful. Thanks, a lot.
Again, ladies and gentlemen, if you wanted to ask a question. Please press star 1.
Our next question comes from the line of losing share from.
Turning company your line is open.
Hi. This is may require onshore vivien thanks, very much for taking my questions. My first question is on Big bag can you offer more color on the growth that you saw by channel last quarter, we discussed your distribution opportunities in alternative channels, how big of a country.
Tubular what that channel and more specifically that you you shouldn't games in that channel. Thank you.
Sure.
Well.
I would say that we saw strong growth across the channels right because in the measure market share gaining share count as a big driver of our ability to each year in that channel.
Channel.
In the non measured channel a lot of it's incremental so.
E Commerce, a big driver of that I mentioned, it was teens as a percentage of our <unk>.
Paper sales and.
That was just starting to ramp really in Q2 of last year, So EBIT contributor to growth.
And you're seeing.
In our mix a bigger percentage of our volumes that are going into these.
These non measured channels, which means that the alternative strategy is ramping up.
So we're seeing healthy growth in each of the channels.
In the measured channel driven by our market share gains in the non measured channel.
You know kind of increasing our penetration in terms of the stores that we are in.
Understood. Thank you and my next question is turning to sell cars.
Quite a tough comp business continued to do well can you comment at all on the growth side form factor specifically versus cans.
Okay.
Stokers, So we were.
Introduced the concept of tubes into the market, which is value.
Stokers terms as the leading brands it remains the leading to a product in the market and it is a driver of the growth.
Is it.
Excellent.
Bye for the consumer.
If you look at it on a per cap basis ex sells at a discount to our cans and you have the convenience factor of only going to the store once a week or so.
And so tubs tubs are the driver in fact, what we see when we put.
We put tubs into 10 stores net.
You do see.
Migration from cans tubs to cans or actually a great introductory product flow.
Tubs and leads to consumers to the tons, they're a great combination.
Thank you.
And last question.
Moving back.
Oh Pal.
On the mechanics of being able to make that day.
Okay.
Sure Yes, it was.
Oh Pal is structured as a non plant touching.
Cannabis company, so they license out the brands.
To their partners and so we were able to invest directly into although we have a convertible note.
At the moment, but.
That is convertible into a.
Kind of a series of common shares as flow.
Thank you.
There are no further question at this time surface pumping Inc.
Well. Thank you everybody for joining the call and we look forward to see you next quarter and with some more good news. Thank you.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
Good day.
Thanks.
Right.
Yes.
Okay.
Good day.
Yes.